Posted: 16 Feb 2013 Last revised: 20 Feb 2014
Date Written: January 16, 2014
Excess bond returns in developed markets are predictable using factors like bond momentum, equity momentum and term spread. We show the same factors can also predict emerging government bond returns of debt issued in local currency. An investment strategy based on the three factors delivers 1.2% outperformance per year after transaction costs. Emerging market local currency debt returns are positively correlated with U.S. treasury returns and have near-zero correlation with U.S. credit excess returns. These results indicate that emerging market local currency debt behaves more like developed government bond debt and less like credits.
Keywords: Market timing, emerging debt, government bonds, bond momentum
JEL Classification: G14, G15
Suggested Citation: Suggested Citation
Duyvesteyn, Johan G. and Martens, Martin, Emerging Government Bond Market Timing (January 16, 2014). Journal of Fixed Income, Vol. 23, No. 3, 2014. Available at SSRN: https://ssrn.com/abstract=2217563 or http://dx.doi.org/10.2139/ssrn.2217563